Supreme Court junks Bombay Bar Association's plea for an NCLAT bench

Supreme Court dismisses plea by Bombay Bar Association to establish NCLAT in Mumbai

The Supreme Court on November 6 dismissed a plea by the Bombay Bar Association to set up a National Company Law Appellate Tribunal (NCLAT) bench in Mumbai.

The plea, filed as a part of a case that was disposed in 2019, was rejected on technical grounds. The court, however, said the bar association could file a writ petition if required.

The Swiss Ribbons case order is considered a landmark judgment, as it upheld the constitutional validity of certain provisions of the Insolvency and Bankruptcy Code (IBC), 2016, which paved the way for a legislative framework on corporate insolvency.

Swiss Ribbons was one of the companies to challenge the validity of IBC.

In its plea, a copy of which was reviewed by Moneycontrol, the bar association contended that in the Swiss Ribbons case, the government had agreed to set up circuit benches of NCLAT in different zones of the country within six months but only one bench, in Chennai, was set up.

Since the undertaking was given when the court was looking at the constitutional validity of Insolvency and Bankruptcy Code, 2016 (IBC), it must be adhered to, the plea said.

NCLAT is the appellate tribunal for hearing cases related to IBC, the companies act and the competition law.

The plea also said the appellate tribunal in Delhi allowed virtual hearing till early 2022 but had since scrapped it, making it difficult for lawyers from the western part of the country to appear in the court.

"Litigants of the Western Region of India, including but not limited to the State of Maharashtra do suffer a significant inconvenience and prejudice. Since, presently there is no bench of the NCLAT established in Mumbai for the western region of India."

Swiss Ribbons order

In Swiss Ribbons judgment, the Supreme Court upheld the constitutional validity of the IBC, as it considered various parameters such as the appointment of the NCLT and NCLAT members, differential treatment of operational creditors and financial creditors and the powers of the resolution professional among others.

The judgment held that IBC was a culmination of all the legislative failures of the governments in dealing with corporate insolvency. "To stay experimentation in things economic is a grave responsibility, and denial of the right to experiment is fraught with serious consequences to the nation," the court said.